CommentsEASTSIDER-Dear Governor Newsom: Since you control, directly or indirectly, the majority of the CalPERS Board, it is likely that you would be blamed if there’s a major CalPERS crisis. Thus, this letter.
Key CalPERS Staff are making investment decisions which have cost the Fund a lot of money with virtually no oversight, and the Board is allowing them to hide the bad stuff from the 1.5 million beneficiaries and their dependents. This is not good.
I am asking you to appoint or designate someone you trust to look into these issues and report back to you with recommendations. Nobody needs another crisis of confidence involving the nation’s largest defined benefit pension plan, and as Governor you certainly do not need any more messes to handle.
Recent Activities Raising Serious Questions about CalPERS
- CalPERS Chief Investment Officer Ben Meng exited a hedge against a bear market just in time to lose a billion dollars. Bloomberg was all over it:
“Ben Meng, chief investment officer of Calpers, said the fund terminated the hedges because they were costly and other risk-management tools are more effective, cheaper and better suited to an asset manager of its size.”
- Two important investment savvy Board members -- State Treasurer Fiona Ma and Margaret Brown -- were suddenly left off the Investment Committee.
- Two key Investment staff -- Ron Lagnado (former Deputy Head of Asset Allocation) and Paul Mouchakkaa (with Real Assets) -- have recently resigned.
- At the April Board meeting, it was revealed that in the third quarter of this year, there were 133 violations involving personal trades by CalPERS staff and consultants, a remarkable number.
- There were also a notable number of missing mandatory disclosure forms (FPPC Form 700) from the Board, employees, and consultants of CalPERS.
- In response to an Inquiry by Naked Capitalism’s Susan Webber over these failures to report, there was no response by CEO Marcie Frost or General Counsel Matt Jacobs. One Board member did respond to the effect that “These types of violations are an HR matter.” Which is simply not true.
- At the April Investment Committee meeting, buried in consent calendar documents, was a huge delegation of the Board’s authority, which would have deleted their oversight role in:
(a) asset class strategic plans and portfolio construction guidelines.
(b) overseeing selection process and performance of external managers and non-board consultants.
(c) overseeing investment office risk assessment and control environment.
Only after a huge pushback by beneficiaries and some Board members, was the Item pulled.
Temporarily.
By having someone you trust look into CalPERS and its challenges regarding investments and oversight, you can assess the risk and determine an outcome to avert a disaster.
Remember, most Cities, Counties, and Special Districts in the State of California are members of CalPERS, and they are already having a terrible time funding the pensions for their employees, even as they teeter on the edge of bankruptcy with all the COVID-19 issues and no Federal bailout.
Thank you for your time and consideration.
Sincerely,
Tony Butka
Los Angeles
(Tony Butka is an Eastside community activist, who has served on a neighborhood council, has a background in government and is a contributor to CityWatch.) Edited for CityWatch by Linda Abrams.
